Gold prices fell by approximately 0.90% on Thursday, with XAU/USD trading at $4,360, as traders responded to a stronger-than-expected US Producer Price Index (PPI) for August and a surge in energy prices, notably Brent and WTI crude benchmarks rising above $100 per barrel for the first time since mid-May [1]. The US PPI increased by 0.4% month-over-month, matching forecasts, but the annual rate reached 5.4%, slightly exceeding the expected 5.3%. The core PPI rose 0.2% monthly, below the 0.3% estimate, while the yearly core figure was 4.6%, in line with expectations [1].
Initial Jobless Claims for the week ending September 5 were reported at 205,000, matching forecasts but lower than the previous week's figure [1]. The combination of higher wholesale inflation and surging oil prices has heightened expectations for a hawkish Federal Reserve stance, with money markets now pricing in nearly a 70% chance of a 25 basis point rate hike at next week’s Fed meeting, according to the CME FedWatch Tool [1].
The US Dollar Index (DXY) rose 0.2% to 98.99, and US Treasury yields climbed, with the 10-year benchmark note up nearly 7 basis points to 4.93%, both factors adding pressure to gold, which is denominated in US dollars [1]. Technical analysis indicates that gold is consolidating above the 100-day Simple Moving Average (SMA) at $4,339, with further downside risk if it breaks below $4,300, potentially targeting $4,282 and $4,200. On the upside, a move above $4,400 could open the way to $4,450 and $4,500 [1].
Looking ahead, traders are focused on Friday’s Consumer Price Index (CPI) release, with expectations for a monthly rise from 0.1% to 0.4% and the annual rate to remain at 3.4%. The core CPI is forecast to hold at 0.2% month-over-month and dip from 2.5% to 2.4% year-over-year. The University of Michigan's preliminary Consumer Sentiment reading for September is also on the economic calendar [1].
CONCLUSION
Gold prices declined sharply as hotter-than-expected US PPI data and a spike in oil prices fueled expectations of a Federal Reserve rate hike. Rising Treasury yields and a stronger US dollar further pressured gold, with technicals suggesting potential for further downside if key support levels are breached. Market participants are now closely watching upcoming CPI data and consumer sentiment readings for further direction.